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You are here: Home / Archives for business planning

Are Business Gifts Tax Deductible?

January 20, 2021 by Jacob Sensiba Leave a Comment

How do you strengthen relationships with customers and/or business partners? A tried and true way is using gifts. However, gifts cost money, so the next question is, are business gifts tax deductible?

The straight answer is yes, but it’s much more nuanced than that.

There are limitations

Business gifts are tax deductible, up to a certain dollar amount. You can deduct no more than $25 of the cost of the gift you give to each person through the course of the year.

Incidental costs such as engraving, packaging, and shipping are not included in the $25 limit as long as it doesn’t add substantial value to the gift.

Gifts that cost $4 or less are not included in the $25 limit IF the company name is permanently placed on the item and the gift is widely distributed.

Entertainment

Any item that can be considered a gift or entertainment is usually considered entertainment and is deducted at 50% of the value of the gift. For purchases that fall under both categories, use the “gift deduction” on lower-cost items and the “entertainment deduction” on items larger than $50.

Gifts to others

If you and your spouse give gifts to the same person, you’re treated as one taxpayer. The same rule applies to partnerships.

Gifting to a customer’s family counts as a gift to that customer, unless the customer’s family member(s) is a client as well.

The $25 limit only applies to gifts given to individuals. Gifts given to other companies, generally, don’t apply and are fully tax deductible.

Gifts to employees are taxable compensation.

Other relevant information

Keep adequate documentation that includes the purpose of the gift, what was spent, the date of purchase, and the business relationship.

Gifts given to a 501(c)3 non-profit are tax-deductible. Up to 25% of taxable income for a corporation.

A large majority of the information I have listed above came from the IRS publication about “Gift taxes”.

Related reading:

Some Often Overlooked Tax Deductions for Business Owners

 

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Filed Under: business planning, Small business, Tax Planning, tax tips Tagged With: business tax, gift tax, Tax, tax deductible

How Much Cash Is Needed to Start a Pawnshop?

January 6, 2021 by Jacob Sensiba Leave a Comment

So you want to start a pawnshop. Where do you start? What do you buy? How much is this all going to cost?

A pawn shop can be a very cash-positive business. While doing research for this post, I stumbled onto a Quora thread that showcased how much money can be made with such an operation. The profits ranged from $30,000 per year to $60,000 per month.

But, you have to get started. In today’s post, we’ll highlight what you need and what it’s going to cost.

What do pawn shops do?

First off, we have to talk about what a pawnshop actually does. Pawnshops buy, sell, and trade items. These items can come from the owner’s personal collection, something they acquired via purchase or something they acquired via loan collateral.

When someone comes to a pawn shop to borrow money, they have to bring something of value for collateral. When the pawnshop lends money to this individual, they retain that valuable item until the principal (plus interest) is repaid. If they fail to repay, the pawnshop keeps the item.

Legal and location

There are many things you need to obtain when you start a pawnshop.

You need to take care of the legal requirements first. This includes licenses, articles of incorporation for your business entity, and permits.

Licenses include pawnbroker’s license, precious metal dealer license, secondhand dealer license, Federal Firearms License (if you plan on selling firearms) from the ATF.

The next thing you need is space. Where you set up shop is an important decision. The right location can bring in a lot of traffic and improve your earning potential. However, the right location comes at a cost.

Areas with high foot traffic cost more. Often, pawnshops will choose a space that’s close to a popular area, far enough away that it’s not too expensive, but close enough to make it convenient for the consumer.

Assets

There’s a minimum asset requirement needed to open. That number depends on the municipality, state, and country you plan on setting up shop in. For example, Texas has a $150,000 minimum requirement.

What do you need?

After you have all of the proper licenses and permits and pick where you’ll operate, you need to buy things to be operational.

These items include a computer (computer system/network), cash register, signs, equipment to display your products, record keeping, insurance, lockable cases, and a state of the art security system.

What you’ll also need is an adequate amount of capital to purchase more inventory and lend money to consumers.

What’s going to cost

Depending on the size of your pawnshop and the anticipated foot traffic, your start-up costs will vary. If you’re a larger shop with a high probability of having a lot of visitors/customers, your starting capital could be between $50,000 and $75,000. A smaller shop with lower projected traffic can get by with $15,000.

Last bit of advice

When you start a pawnshop, you need to refine and learn some new skills. You have to educate yourself on how to assess the value of goods so you can acquire sellable items, but not at a cost that eats into your profit margin.

Also, you have to come up with a business plan. What interest rate will you charge on your loans? How much will you mark up the items you sell? How much are you willing to pay for inventory?

All of these questions need answers. Keep in mind, this planning process should take place prior to buying the necessary licenses and other items to get the business started.

Related reading:

3 Ways to Get Financing for your Small Business

4 Ways to Use Business Loans

Some Often Overlooked Tax Deductions for Business Owners

Business Retirement Plan Guide

 

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see website for full disclosures: www.crgfinancialservices.com

Filed Under: business planning, Insurance, money management, Personal Finance, Planning, Small business Tagged With: Business, capital, cash, Cost, license, location, pawnshop, permit

Appreciating vs. Depreciating Assets

October 7, 2020 by Jacob Sensiba Leave a Comment

appreciating and depreciating assets

I think it’s widely known that there are two types of assets: appreciating and depreciating. I think it’s less known what’s classified as appreciating and depreciating.

In this article, we will look at what each term means, examples of each, and how to use them effectively.

What’s appreciation?

Appreciation is the increase in value. The majority of assets used to accumulate and grow wealth, appreciate. An asset can appreciate because of supply, demand, or a change in interest rates.


 

What’s depreciation?

Depreciation is the exact opposite. It’s the loss of value. The most common example is a car, but more on that later.

Appreciating assets

  • *Stocks – It’s commonly known that investing in stocks is the best way to not only keep pace with inflation but to grow your wealth. A stock is partial ownership in a public company. Popular examples include Apple, Amazon, Facebook, etc. (Click here to learn more about stocks)
  • Real estate – Single-family homes, duplexes, apartment complexes, etc. Though the pace at which real estate appreciates dwarfs compared to stocks, it does so slightly over time. (Source)
  • Private equity – This can be starting a company of your own or you can invest in a startup. There are also private equity funds that exist, as well. Basically, it’s a company or venture that is not open to the public (i.e. stocks on the exchange, etc.).
  • Alternative – Less common assets that could appreciate (cryptocurrencies, precious metals, art, and other collectibles).
  • Bank accounts – Savings accounts, certificates of deposit, etc. These don’t appreciate much, especially in the current “low-interest-rate”. Some may argue that you shouldn’t classify these as appreciating assets because inflation erodes away the purchasing power over time.

Depreciating assets

  • Cars
  • Boats
  • Furniture
  • Equipment
  • Patents/Copyrights – Patents, other than section 197 intangibles, have a useful life of 10 years and can be amortized over that 10 year period. (Source)

What’s the point?

  • Appreciating assets – Owning and investing money in an appreciating asset is the key driver in growing your wealth. Those who’ve accumulated significant amounts of wealth have done so by earning a living, saving, and investing diligently over decades.
  • Depreciating assets – There are a few reasons to own a depreciating asset.
    • Fun and convenience – We own and drive cars because we need them to go places. We buy boats because they are fun. In either case, you could also own a car or boat for your business, in which case it would serve a different purpose.
    • Business – Owning and operating machinery and equipment is how many of us make a living or run a business.
    • **Tax write off – If you use equipment, machinery, cars, etc. for business, oftentimes you can use the depreciation of that equipment as a tax write off.  Financial advisors use a set of fancy calculations to come up with the tax benefits of depreciation, we won’t go into that here.

Conclusion

Appreciating and depreciating assets both serve a purpose. It’s important to know the difference between the two and how to use each one as effectively as possible.

*Stocks can sometimes experience periods of volatility and negative performance. During such periods, the value of such stocks may decline.

**Be advised: talk to your accountant about specifics.

Filed Under: business planning, Investing, investment types, Personal Finance, Real Estate Tagged With: apperciating, Asset, assets, depreciating

When are Per Diem Payments Taxable?

September 2, 2020 by Jacob Sensiba Leave a Comment

per-diem-tax

 

Per diem payments are used when businesses have employees that travel. These payments are designed to relieve the employee from certain costs associated with traveling. Particularly meals and incidentals (ground travel, laundry, room service, etc.), and lodging.

This is great for both the business and the employee, but there are certain situations when per diem payments are taxable. In this article, we’ll explore exactly when an employee will pay per diem tax.

Two types

There are two types of per diem payments, meal-only, and meal and lodging. The names imply their use. One pays for meals, the other pays for meals and lodging.

It’s important that we specify the meals must be “non-entertainment related” meals.

Stipulations

As with many parts within the tax code, per diem rules are very specific. Meals and lodging have different rates.

Also, different cities have different rates. These differences are typically relegated to “big cities” and “small cities”, with bigger cities getting the larger rates. This is referred to as the high-low method. Businesses may also make payments based on the state in which you travel.

The per diem payments must be equal to or less than the federal allowable limit (depending on what method is selected). The employee is responsible for filing an expense report within 60 days. The expense report needs to include, date and location of the trip, purpose of the trip, and lodging receipts (if the meal-only option is selected).

You’re not allowed to “transfer credits”. What’s meant by this is if you use less on your lodging than is allotted, you can’t use the excess on food, or vice versa.

Tax Consequences

As I mentioned in the introduction, per diem payments can have tax consequences.

  • If per diem payments over the limit are taxable on the employee’s wages
  • If an expense report isn’t filed, or the filed expense report doesn’t include the required information, those per diem payments become taxable to the employee.
  • If the employer allows you, the employee, to keep whatever you don’t spend.

If you travel for business and receive per diem payments, just make sure you keep good records, and you hang onto your receipts. It’s better to have too much information than not enough.

Related reading:

Some Often Overlooked Tax Deductions for Busines Owners

Top 5 Overlooked Tax Deductions You Should Be Using

Why Financial Literacy is Important

 

*Be advised: Securities America and its representatives do not provide tax advice. Please consult a tax professional for specific information regarding your individual situation.

Filed Under: business planning, money management, Personal Finance, Tax Planning, tax tips Tagged With: per diem, Tax, travel

How to Grow Your Business Credit Score To New Heights

August 30, 2019 by Susan Paige Leave a Comment

Much like individuals, businesses also have their own credit score. This score is entirely separate from the personal credit score of whoever owns the business, and is used whenever the business would like to obtain a loan, line of credit, or other types of agreement in which a service is provided before payment is rendered. A business with a high credit score is seen as financially stable and trustworthy, while a business with a low score is often seen as unscrupulous and more likely to engage in shady practices.

To make sure you’re on the good side of the banking system, here’s how to grow a business credit score from non-existent to stellar:

Pay all your bills on time.

This is the most obvious and should be one of the easiest things to accomplish when it comes to raising your credit score. The credit history of your business is part of calculating your overall score. If you always pay your dues in full before they’re overdue and continue to do so for long periods of time, that’s a track record guaranteed to boost your score.

Decrease your credit utilization ratio.

For businesses that have a line of credit they can draw from at any time, the actual utilization of that credit must be low. If your business is always using 80% of its available credit, that isn’t a positive signal for your business. Banks much prefer credit utilization rates between 10%-20%, with minor upticks in usage acceptable as long as they aren’t held for long periods of time. If you have high credit utilization, but a lot of spare funds are lying around, consider using it to bring down your overall credit usage.

Take out a loan.

As counterintuitive as it might seem, taking out a loan that isn’t wholly necessary, but is entirely manageable can be a very effective and speedy boost to your credit score. If you never borrow money, how can a creditor assess how fit you are to pay the money back? If you look for a source for small business loans, you’ll notice these loans tend to be fairly agreeable in terms and conditions and aren’t too much of a financial burden to bear. Of course, this strategy only works if you make your payments on time and eventually repay the entirety of the loan. Consider it practice for when you start asking the bank for more serious sums of money.

Conclusion

At certain stages of the life cycle of a business, massive injections of cash from creditors are sometimes necessary. Whether it be to acquire a smaller competitor or upgrade your business to the next level, it’s good to build your credit score sky-high. Also, higher credit means a quicker approval time and lower interest rates, saving you both time and money. That’s something every good entrepreneur knows they could always use more of. This is why you must ensure your business operates in a way that creditors think they have a minimal risk by lending you money. Then, you’ll reap the fantastic rewards of good credit.

Filed Under: business planning Tagged With: Small business, successful business

Business Savings – Choosing the Right Equipment

August 30, 2019 by Susan Paige Leave a Comment

If you’re looking to cut costs within your business, you might want to take a look at the equipment you’re using. Did you know that your equipment could be costing you a lot more than it needs to?

Here, you’ll discover how choosing the right equipment can make a big difference to your running costs. You may just be surprised by the amount you could be saving.

How old is your equipment?

The first thing to look into is the age of your current equipment. How long have you had it and when was it last updated? This matters for a number of reasons. Firstly, older equipment is nowhere near as efficient as newer equipment. This means it’s going to cost you more to run it. Say you run a hospitality business for example. Investing in newer equipment form a company like JLA, will significantly reduce your monthly running costs.

Another reason why it matters is because it effects efficiency. Newer equipment is built with the latest technologies. This makes it more efficient, producing much better results. This in turn is going to help you work faster and keep your customers happier. As a direct result, this will also increase your profits.

Ensuring you don’t have more than you need

You’re also going to want to make sure you don’t have more equipment than you actually need. This includes having high-tech equipment you don’t really use. It’s all well and good investing in the latest equipment with an impressive list of features, but do you actually need them? If not, it’s time to sell it and invest in equipment you will make full use out of. After all, why would you pay more than you need to?

Consider leasing

When you’re looking to save money on larger equipment, leasing could be a great option. You’ll get to pay a low monthly fee to benefit from the latest equipment. This is an especially great option for businesses which need to replace or upgrade their large equipment but who don’t have the funds. You may need to pay a little upfront, but it will be a lot more affordable than buying the equipment outright.

There’s a lot of ways you can save your business money. Paying attention to your equipment and making sure you choose the right type for your business is going to really help. It’s surprising just how much money you can save by following the advice above.

Image credit: Pexels.

Filed Under: business planning Tagged With: Business, business planning, business valuation

Choosing A Retirement Plan For Your Business

June 12, 2019 by Jacob Sensiba

What type of retirement plan to use is a big question for employers. Not only do they want to do what’s right for the business, but they also want to do what’s best for their employees and future employees.

In the following article, we’ll break down three of the most popular options for employer-sponsored retirement plans.

What are your options?

If you’re an individual, your options are pretty straight forward. Outside of your employer-based plan, you can either contribute to a Roth IRA or a Traditional IRA.

As a business, however, you have many other options. For organizations that are for-profit and not a government body, you the SEP IRA, SIMPLE IRA, and the 401(k).

More than likely, you’re most familiar with the 401(k). We’ll explore each of these below.

SEP IRA

Stands for Simplified Employee Pension Individual Retirement Account.

This retirement account is typically used with one-man shops or small businesses with a couple of employees.

The reason is the money contributed to the employee’s accounts can only come from the business. Employees are not eligible to contribute to their SEP account.

Here the characteristics of a SEP IRA:

  • Must contribute the same percentage of salary for each employee
  • Don’t need to contribute every year
  • Maximum contribution is $54,000 per year or 25% of annual salary, whichever is less
  • Contributions are deductible as a business expense for the entity
  • Money grows tax-deferred
  • When funds are withdrawn, they are taxed as ordinary income
  • Rules similar to a Traditional IRA
    • Withdrawals prior to 59 ½ unless used for a qualified purpose (qualified meaning exempt from the penalty, which is 10%)
    • Required Minimum Distributions must begin at 70 ½

SIMPLE IRA

Stands for Savings Incentive Match for Employee Individual Retirement Account.

Designed for small businesses, and has an employee limit of 100. If you go over 100 employees, you need to switch to a 401(k).

The SEP and SIMPLE (compared to the 401(k)) are inexpensive to set up and administer, and may be a great option for small businesses that want to offer a plan for their employees, but don’t want to pay the costs associated with a 401(k).

Here are the characteristics of a SIMPLE IRA:

  • Contribution limit of $13,000. A catch-up contribution of $3,000 for those 50 or older
  • Employees can contribute to their own plan (unlike the SEP)
  • Employers match contributions
    • Match up to 3% of employee’s contribution (doesn’t have to contribute if the employee doesn’t contribute).
    • Contribute a flat 2% whether or not the employee contributes.
  • Similar to the last plan, withdrawals before 59 ½ are penalized.
  • Also similar to the last plan, distributions must begin at 70 ½
  • There’s a weird quirk with the Simple, as well. If you withdraw funds earlier than 2 years after your first contribution, you’re penalized 25%.

401(k)

The 401(k). The plan that most people are familiar with, and if you have an employer-sponsored plan, it’s more than likely, this one.

The 401(k) gained popularity as companies switched from defined benefit plans (pensions) to defined contribution, where it became the responsibility of the employee to save for retirement instead of the employer.

Here are the characteristics of the 401(k):

  • Contribution limit is $19,000 with a catch-up of $6,000 for people 50 or older.
  • Total contribution limit, including employer contributions, is $54,000.
  • The 401(k) is an expensive plan to set up and administer, especially when compared to the previous two plans.
  • Like the previous two plans, the 401(k) penalizes you if you withdraw before 59 ½ unless your reason for withdrawal qualifies for an exemption. And you must begin withdrawing funds when you turn 70 ½.
  • With this plan, however, you are able to take a loan out against your savings. This loan has to be paid back, usually in the form of increased monthly contributions.
    • If you are let go from your job while you have a loan on the plan, you will be forced to pay it back with 60 days. If you don’t you’ll be taxed on the amount, and if you’re under 59 ½, you’ll be penalized 10%.
  • This type of plan is designed for larger employers, though there is no maximum or minimum on how many employees you can have.
    • They have a type of 401(k) called the solo 401(k). It has all the same rules and quirks as the standard 401(k), but it’s designed for someone who works by themselves OR their only employee is a spouse.

How to choose

Unfortunately, I can’t say which plan is the best. Each one has its own unique advantages and disadvantages.

When deciding which plan is best for you and your business, there are a few things I would take into consideration.

  1. Number of employees – some plans disqualify you if you have too many employees.
  2. Matching ability – Most 401(k) plans match up to 6%. The SIMPLE requires you to match up to 3% or contribute a flat 2% for every employee.
  3. Cost – Some plans are less expensive to set up and service than others. In terms of the 401(k), the more participants and assets you have in the plan, the less expensive (per user) it becomes.
  4. Attracting talent – More and more employers are using benefits packages to attract employees rather than salary, in what’s called all-in compensation. If you want to get qualified candidates in the door, you have to offer good benefits.

Conclusion

It should be known that whatever you decide, it’s not set in stone. If you set up a SIMPLE and you need to hire more employees than you anticipated, you can set up a 401(k). The SIMPLE will have to stay in place, and you’d just have current and new employees contribute to the 401(k).

For more information on all of these plans and others, read this article here.

Be advised: The numbers and figures listed in this article are for 2019. Contribution limits tend to change over time. Please review the IRS website for up to date information.

Filed Under: business planning, Personal Finance, Planning, Retirement

Saving More by Doing Less Through Outsourcing

May 24, 2019 by Ashley Leave a Comment

Outsourcing a part of your business or even just a specific project can be a highly cost-effective solution. You forego a long list of expenses for a single contract price. Plus, you can focus all of your time on your core business, such as growing your customer or client bases. Not every business has the resources to assemble an in-house team for everything that needs to be done. Sometimes, it makes sense to hire an agency that are already experts on certain tasks to do it for you. Learn more about how you can lower expenditures and get more time by unloading a part or your business through outsourcing.

Cost benefit analysis (CBA) is key to doing business. It projects the net amount of costs and benefits of at least two choices when making decisions. This guides executives to make an economic decision based on quantifiable data.

CBA is especially relevant to investments involving substantial cash flows like choosing new capital expenditure over major equipment overhaul, finance lease over land ownership, and offering a new product line over expanding existing product lines. This makes it easier to choose the best option that offers the highest net benefit or the lowest net cost.

Deciding whether to outsource a part of your business or to do it on your own is one of the common business decisions and one of the toughest to make. You need to consider all the pros and cons to choosing the option that is more favorable to your business within the next twelve months and in the long-run. With CBA, you can list all the figures that matter to both choices, compare analytics such as cash flows adjusted in the present value and eventually pick the better one that will lead to lower costs but higher returns.

Going for outsourcing is a win-win solution. You can usually pay for a fixed contract price, either on a per-project basis or a monthly rate, and you are free from managing such particular part or division. That is both savings on time and money.

Additionally, highly skilled and experienced workers are then able to do the job for you. You get to experience the expertise of professionals who might have been specializing in the task you hire them for. These are just several of the benefits of outsourcing your contact center, manufacturing, bookkeeping, marketing, and other departments of your business.

The caveat and probably the greatest risk with this set-up is the reliability of the third party service contractor. You might read compelling proposals backed by persuasive client testimonials, case studies and impeccable presentations.

But, these alluring words tend to be shallow. You need proof and that means doing research, confirming reviews directly from clients, performing ocular inspection on-site and even asking for a demo tour or free trial. The price, although cheaper, is still a big investment for you. And you need to reap the best value for your money. If the supplier fails, it is going to hurt your business. You can usually ask for a trial or demo period to test their service and see if it produces results at a smaller scale, before committing to them completely.

If you choose not to outsource, you need to tackle the birthing pains of handling it on your own. You need to hire the right people with the right skills. And you need ample time to plan, implement, monitor and evaluate the important aspects. The good thing with doing it on your own is you get full control. You see how a project progresses and you can easily tweak the processes along the way. But if you don’t have the time, the people and additional capital, then you can always ask for professional help.

Several companies have partnered with other companies, domestic or abroad, to work on business process outsourcing. Telecom giant AT&T has long-term business relationships with contact centers based in Asia for its customer service and technical support. Nike has let go of its footwear manufacturing processes to various Asian countries. Goods sold at Wal-Mart are produced from its Chinese partners. These are just of business mammoths that fueled their growth by outsourcing several of their business segments.

It takes guts to let someone do a job for you. But, if that someone can give you the expected benefits and even more, then there is no reason not to outsource. Think which works better for your business now and the years to come.

Filed Under: business planning

How to Get Free Financial Advice

November 20, 2017 by Emilie Burke 1 Comment

If you’re just getting started with financial planning and investing, you may not have the funds to hire a professional to help you. But there are ways you can get great financial advice for free.

There is one important factor to keep in mind with free advice though, it’s often times not based on your personal information. The free advice you get is based on generals so you will need to figure out what works best for you. But that doesn’t make the advice any less valuable for your purposes. It’s always good to learn something new; you never know where it might lead.

If you’re looking for free advice and you’re willing to weed out what you need based on the general information you receive, here are a few good places to start:

Meet with a Financial Planner

Some financial planners offer a free consultation if they think you’re in the market for hiring someone. Keep in mind, their advice will be very general because they’ll want you to hire them to do the work.

Many also offer complimentary group classes. They do this as an introductory to their services to try and get at least a few new clients out of each class. Again, the information is general, but there is usually some very good advice offered. Check with a few financial planning firms in your area to see if they have any upcoming classes.

Lastly, the CFP hosts a “financial planning day” where anyone can come and meet with a financial planner for free. The event usually takes place in the fall. Go to Financial Planning Days to find out when and where one will be offered near you.

Go Online

Visit your retirement plan or brokerage website for financial information. Many, including TD Ameritrade, offer online courses for their customers to learn important financial planning information. If you’re investing through a brokerage firm, take a look at the account management tools they offer on their site. Another great site for free financial planning courses is Udemy.

Sign Up with a Robo-Advisor

Many online financial planning tools offer a variety of financial advice. In many cases, that advise is free. (Sometimes there is a fee so be sure to read the fine print.) You can receive guidance on managing your portfolio, the best investments to reach your goals, and retirement planning.

Read Reputable Financial Sources

Even if you decide to hire a financial advisor, it’s always a good idea to do your own research and keep up with the financial world. You should never put all your faith in someone else to manage your finances. There are a few good sites for keeping up with financial news:

  • CFP’s “Let’s Make a Plan” site for Estate Planning
  • MarketWatch
  • Motley Fool

Local Financial Services Programs

Community-based programs are nationwide and offer free financial advice. Search your local area for organizations that offer free programs and check your local community centers and libraries. There are other resources specifically for survivors of domestic violence, active military and veterans, and people who are considered low-income.

If you’re dealing with a significant amount of debt, you may want to consider credit counseling. Visit NFCC to learn about their free counseling programs.

Not being able to afford a financial advisor is no excuse for not getting your finances in order. With so many free resources available, you can at least get started reducing your debt and increasing your income so that you can move towards a better financial future.

Filed Under: business planning

Should a Business Use a Line of Credit or Credit Cards for Finance?

September 21, 2017 by Ashley Leave a Comment

Practically all businesses need money at one point or another. Many financing options exist, but two popular choices are to open a line of credit or get a credit card. Deciding upon the best option may be difficult since credit cards and lines of credit work in a similar way — both allow you to access money when you need it and then you make payments on a predetermined schedule. If you don’t know whether to use a line of credit or a credit card for finances, the scenarios below can help you decide.

What Do You Do If You Have a Difficult Time Getting Approved for a Loan?

Credit cards typically have higher interest rates than lines of credit, but getting approved for a credit card is much easier. All you need is proof of income to get a credit card. A line of credit requires proof of income and collateral. If you’ve previously been declined for a loan, a credit card can be your best option, giving you a better chance of getting approval to borrow the money you need.

What Do You Do If You Need to Get Money Fast?

Getting a credit card is easier and faster than getting a line of credit. Many banks will instantly approve you for a credit card and give you a number to use until your official card arrives in the mail. You could potentially use a credit card the same day you apply for one. If you need money quickly, a credit card is the best option. However, you’ll need to keep in mind that you’ll have to deal with higher interest rates than if you requested a line of credit.

What Do You Do If You Need to Borrow a Large Sum of Money?

Credit cards allow you to receive money quickly, and you can get approved to receive one without much hassle. However, you can usually get approved to borrow more money with a line of credit. If you need more than a few thousand dollars, a line of credit is your best option.

You can turn to almost any bank for a small business line of credit, but working with a company that specializes in this type of credit is better. For example, Kabbage offers unsecured small business lines of credit at competitive interest rates. Additionally, this online lender could qualify you for a line of credit up to $150,000.

What Do You Do If You Only Need a Loan for a Short Time Frame?

In general, getting a line of credit is better than a credit card because lines of credit have lower interest rates. This reality doesn’t matter much if you plan to have the loan only for a short time frame. If you pay off your credit card the same month that you use it, sometimes you can avoid interest entirely.

Never apply for a line of credit or a credit card without a plan for how you will pay back the money. Always consider the terms of the loan and choose the best option for your business. If you still don’t know what to do, talk to a business financial expert.

Filed Under: business planning

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